Now That The Swap Will Be Swapped | Independent Newspapers Limited
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Now That The Swap Will Be Swapped

Posted: Feb 26, 2016 at 9:33 am   /   by   /   comments (0)

By Bob MajiriOghene Etemiku

At an oil and gas reforms workshop which took place in Abuja in August 2015, I had the privilege of listening to as many scholars and stakeholders in the industry as possible.  Everyone had something useful to say, against the background that a new set of politicians had just taken over as government and was looking to chart a different course in the oil and gas sector. Based on the Reports of the Bern Declaration and that of the Natural Resource Governance Institute, NRDI, we all just realized that one of the biggest heists in the oil and gas sector had been taking place right under our noses.

When Nigeria barters its crude for fuel as a refined commodity for local consumption, it gets the crude as crude without asking for payment for all the allied products from the crude. The allied products that we are talking about include gas, diesel and that commodity known as engine oil. What this translates to is that while we were paying a subsidy for bringing in only half of what we should bring in, we were losing three-quarters of what we apparently did not know that we could get.  In 2012, and that is according to information released by NEITI, Nigeria earned $6.9billion as revenue from oil and gas.

Now, if this piece of information is accurate, it means that if we had sold our crude oil and factored in what should accrue from our oil in terms of  diesel, and engine oil, our income from our crude sales would have somewhat quadrupled.  Part of what is responsible for this anomaly is what the Bern and the NDRI state inter alia, that Nigeria engages in battering our crude oil for refined products, aka oil swap, with ubiquitous behemoths, and that there is a certain domestic crude allocation to the NNPC.

To redress these glitches, both reports recommend the elimination of direct crude allocation to the NNPC and transparency in payment flows, the development of an explicit revenue collection framework for the NNPC, the winding down of all Offshore Processing Agreements, OPAs, the sale of crude to end users and the strengthening of a programme of transparency and accountability. It is cheerful that the government has plans to cancel the oil swap deal. In an announcement of February 2, 2016, the Petroleum Minister said that government was adopting Direct-Sale–Direct-Purchase, DSDP, arrangement billed to take off from March 2016.  I want to encourage the Energy Minister to take care to negotiate a better deal for Nigeria wherein all allied products from our crude is factored into the costs that would prevail in the DSDP regime. And if you ask me, this last point is what I hope this discussion should be about.  The oil and gas workshop threw up issues that I think are still worth talking about. A discussant at that workshop advised that instead of focusing on what accrues to us from oil, we should rather focus on HOW those monies are spent. The point the official was trying to highlight I guess is that we are where we are now because monies that come in from oil were, over the years, just shared at the three tiers of government, and were unreasonably appropriated as emoluments to political office holders without a plan for today. To begin to examine what we should do next, I hear that the National Economic Council NEC has recently engaged two audit firms – the one an international firm, KPMG, and the other a local one, ISO, to conduct forensic audits on the crude oil remittances from the NNPC and 81 government revenue generating agencies following submission of an interim report by the ad hoc committee of NEC, chaired by Governor Adams Oshiomhole of Edo State.

While the proposed audit by the Federal Government into 81 government revenue generating agencies seems to be the proper thing to do at this point when government desperately needs to fund its projects with recovered looted funds from those who have allegedly stolen from the common purse, the engagement of another international audit firm, KPMG, to audit the accounts of the NNPC for forensic needs raises many questions.